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Friday, November 25, 2016

Basis points

Basis points (basis point).

The definition of the basic points can have several meanings, depending on the application, and a recording method.

Basis points (basis point) - this is the last digit in recording interest rates of banks or quotations in forex trading, which is why it may have different meanings, depending on how many digits after the decimal point is used.

Do not confuse this concept with interest, the calculation of which is always held on the same circuit.

In banking practice, rates are usually recorded as 15.01, or in rare cases such as 15.1. When you change one item in the first bet will be equal to 15.02, and the second 15.2.

A two-digit value is used in the rate of the National bank, and one decimal place you can see, when it comes to lending rates.

In the forex market basis point is used in the foreign exchange quotations, but here as well, not all clear, since most of the quotations recorded as a four values, and those that include our Japanese yen, served in two-digit form.

In this case, the basic point is:

EUR / GBP 0,8412 fourth digit after the decimal point, or one ten thousandth, so if it sounds a message that the course changed by 100 points it's only reports the change to the one-hundredth.

EUR / JPY 120,07 second digit after the decimal point or one-hundredth.

It is for this reason, you should consider the definition of basis points, depending on the application. How much is 1 pip Forex you can find on this link.